FORWARD LOOKING STATEMENTS The following investor presentation contains certain forward-looking ; the effects of competition and pricing pressures; industry capacity; shifts information within the meaning of applicable securities laws relating, but not in market demand; inflation; changes in laws and regulations, including limited, to Canadian Pacific’s operations, priorities and plans, anticipated regulation of rates; changes in taxes and tax rates; potential increases in financial performance, including our 2019 full-year guidance (including maintenance and operating costs; uncertainties of investigations, volume and adjusted diluted earnings per share (“EPS”) targets), business proceedings or other types of claims and litigation; labour disputes; risks prospects, planned capital expenditures, anticipated revenues and the and liabilities arising from derailments; transportation of dangerous source thereof, programs and strategies (including financing strategies). goods; timing of completion of capital and maintenance projects; currency This forward-looking information also includes, but is not limited to, and interest rate fluctuations; effects of changes in market conditions and statements concerning expectations, beliefs, plans, goals, objectives, discount rates on the financial position of pension plans and including assumptions and statements about possible future events, conditions, and long-term floating rate notes; and investments, various events that could results of operations or performance. disrupt operations, including severe weather, droughts, floods, avalanches and earthquakes as well as security threats and Forward-looking information may contain statements with words such as governmental response to them, and technological changes. “anticipate”, “believe”, “expect”, “plan”, “financial expectations”, “key assumptions”, “outlook”, “guidance”, or similar words suggesting future The foregoing list of factors is not exhaustive. These and other factors outcomes. are detailed from time to time in reports filed by CP with securities regulators in Canada and the United States. Reference should be made Undue reliance should not be placed on forward-looking information as to “Management’s Discussion and Analysis of Financial Condition and actual results may differ materially from the forward-looking information. Results of Operations” in CP’s annual and quarterly reports filed on Form Forward-looking information is not a guarantee of future performance. The 10-K and 10-Q, respectively. purpose of our 2019 guidance is to assist readers in understanding our expected and targeted financial results, and this information may not be Forward-looking information is based on current expectations, estimates appropriate for other purposes. and projections and it is possible that predictions, forecasts, projections, and other forms of forward-looking information will not be achieved by CP. By its nature, CP’s forward-looking information involves numerous Except as required by law, CP undertakes no obligation to update publicly assumptions, inherent risks and uncertainties that could cause actual or otherwise revise any forward-looking information, whether as a result results to differ materially from the forward-looking information, including of new information, future events or otherwise. but not limited to the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities
NOTE ON NON-GAAP MEASURES Except where noted, all figures are in millions of Canadian dollars. In this presentation, CP has provided a forward-looking Non-GAAP measure. It is not practicable to provide a reconciliation to a forward- Financial information is prepared in accordance with accounting looking reported diluted EPS, the most comparable GAAP measure, principles generally accepted in the United States of America (U.S. due to unknown variables and uncertainty related to future results. GAAP), unless otherwise noted. For further information regarding Non-GAAP measures see the Non- CP presents Non-GAAP measures in this presentation to provide a GAAP Measures supplement to the press release on our website at basis for evaluating underlying earnings trends that can be compared investor.cpr.ca. with the prior period's results. It should be noted that CP’s Non-GAAP measures as described in this presentation, have no standardized meanings and are not defined by U.S. GAAP and, therefore, are unlikely to be comparable to similar measures presented by other companies. NOTE ON ADOPTION OF LEASE ACCOUNTING The adoption of Accounting Standards Update (“ASU”) 2016-02, discussed further in Note 2 Accounting changes in CP’s Interim Consolidated Financial Statements in the Q3 2019 Earnings Release on investor.cpr.ca, was by the cumulative-effect transition approach. Accordingly, comparative financial information has not been restated.
HIGHLIGHTS Q3 PERFORMANCE Revenues Record third quarter financial • $2.0 | +4% ($ billions) results; all-time record-low operating ratio Operating Income $869 | +10% ($ millions) Record operating metrics and • continued safety performance $4.46 | +3% Diluted EPS Confident in our ability to generate • double-digit adjusted diluted EPS (1) growth for the year Adjusted Diluted $4.61 | +12% EPS (1) Operating Ratio 56.1% | -220 bps (%) (1) For a full description and reconciliation of Non- GAAP Measures, see CP’s Q3 2019 Earnings Release on investor.cpr.ca
OPERATING PERFORMANCE Average train speed FRA train incident frequency Average terminal dwell (miles per hour) (per million train-miles) (hours) 22.7 22.1 7.1 1.57 21.6 6.9 21.2 6.7 5.8 1.26 1.19 1.10 16% Improvement 6% Improvement 5% Improvement 4% Improvement 30% Improvement 6% Improvement Q3'19 Q3'18 YTD'19 YTD'18 Q3'19 Q3'18 YTD'19 YTD'18 Q3'19 Q3'18 YTD'19 YTD'18 FRA personal injury rate Car Miles / Car Day Locomotive Productivity (per 200,000 employee-hours) (Total Miles / Active Cars on Line) (Gross ton-miles / Operating Horsepower) 170 1.48 1.47 1.44 1.39 154 208 148 203 147 200 197 2% Improvement 2% Improvement 15% Improvement 5% Improvement 5% Improvement 3% Improvement Q3'19 Q3'18 YTD'19 YTD'18 Q3'19 Q3'18 YTD'19 YTD'18 Q3'19 Q3'18 YTD'19 YTD'18 Certain figures have been updated to reflect new information or have been revised to conform with current presentation
REVENUE HIGHLIGHTS TOTAL REVENUE FX-adjusted revenue variance (1) +4% Grain 6% Coal 7% VS Q3 2018 Potash -10% Fertilizers & sulphur 18% Forest products 3% RTMs: -1% • Energy, chemicals & plastics 12% FX: flat • Fuel: -1% • Metals, minerals & consumer -4% Price / Mix / Other: 6% • Automotive 1% — % Intermodal (1) For a full description and reconciliation of Non- GAAP Measures, see CP’s Q3 2019 Earnings Release on investor.cpr.ca
BULK Q3’19 VS. Q3’18 MARKET DRIVERS Freight Revenue • Delayed start to the Canadian grain (FX-adj.) (1) 4% harvest; 2019/20 crop expected to be RTMs approximately 71-72 MMT -3% Freight Revenue • Export potash volumes down due to delay 8% per RTM (FX-adj.) (1) in contract signing between potash producers and customers (1) For a full description and reconciliation of Non- GAAP Measures, see CP’s Q3 2019 Earnings Release on investor.cpr.ca
MERCHANDISE Q3’19 VS. Q3’18 MARKET DRIVERS Freight Revenue • Forest products continue to benefit from (FX-adj.) (1) 5% the growth of CP’s transload network RTMs — % • Continued growth in automotive driven by Freight Revenue new automotive compounds 5% per RTM (FX-adj.) (1) • Decline in metals and minerals driven by frac sand and steel; partially offset by record cement (1) For a full description and reconciliation of Non- GAAP Measures, see CP’s Q3 2019 Earnings Release on investor.cpr.ca
INTERMODAL Q3’19 VS. Q3’18 MARKET DRIVERS Freight Revenue • Continued strength in international (FX-adj.) (1) — % intermodal volumes through the Port of RTMs 3% Vancouver Freight Revenue • Domestic volumes mixed – retail growth -2% per RTM (FX-adj.) (1) offset by softness in wholesale • Expecting modest peak season (1) For a full description and reconciliation of Non- GAAP Measures, see CP’s Q3 2019 Earnings Release on investor.cpr.ca
FINANCIAL PERFORMANCE – Q3 (In millions, except percentages and Third Quarter FX adjusted Change (1) % per share data) 2019 2018 Change % Total revenues $ 1,979 $ 1,898 4% 4% Compensation and benefits 355 365 (3%) (3%) Fuel 210 226 (7%) (8%) Materials 50 47 6% 6% Equipment rents 33 33 — % — % Depreciation and amortization 185 174 6% 6% Purchased services and other 277 263 5% 5% Total operating expenses 1,110 1,108 — % — % Operating income 869 790 10% 9% Other expense (income) 29 (47) (162%) Other components of net periodic benefit recovery (99) (96) 3% Net interest expense 110 112 (2%) Income tax expense 211 199 6% Net income 618 622 (1%) Adjusted income (1) 640 589 9% Diluted earnings per share 4.46 4.35 3% Adjusted diluted earnings per share (1) 4.61 4.12 12% Operating ratio 56.1% 58.3% (220) bps (1) For a full description and reconciliation of Non- GAAP Measures, see CP’s Q3 2019 Earnings Release on investor.cpr.ca
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